Introduction to Cost Accounting BCSV

[COST ACCOUNTING]
Introduction to Cost Accounting

A. Multiple Choice
Choose the letter of the best answer.

1. In comparing financial and management accounting, which of the following more

accurately describes management accounting information?
a. historical, precise, useful
b. required, estimated, internal
c. budgeted, informative, adaptable
d. comparable, verifiable, monetary

2. Management and financial accounting are used for which of the following purposes?

Management Financial
accounting accounting

a. internal external
b. external internal
c. internal internal
d. external external

3. One major difference between financial and management accounting is that

a. financial accounting reports are prepared primarily for users external to
the company.
b. management accounting is not under the jurisdiction of the Securities
and Exchange Commission.
c. government regulations do not apply to management accounting.
d. all of the above are true.

4. Which of the following statements about management or financial accounting is

false?
a. Financial accounting must follow GAAP.
b. Management accounting is not subject to regulatory reporting
standards.
c. Both management and financial accounting are subject to mandatory
recordkeeping requirements.
d. Management accounting should be flexible.

5. Management accounting
a. is more concerned with the future than is financial accounting.
b. is less concerned with segments of a company than is financial
accounting.
c. is more constrained by rules and regulations than is financial
accounting.
d. all of the above are true.

6. Modern management accounting can be characterized by its

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a. flexibility.
b. standardization.
c. complexity.
d. precision.

7. Which of the following is not a valid method for determining product cost?
a. arbitrary assignment
b. direct measurement
c. systematic allocation
d. cost-benefit measurement

8. Broadly speaking, cost accounting can be defined as a(n)

a. external reporting system that is based on activity-based costs.
b. system used for providing the government and creditors with
information about a company's internal operations.
c. internal reporting system that provides product costing and other
information used by managers in performing their functions.
d. internal reporting system needed by manufacturers to be in compliance
with Cost Accounting Standards Board pronouncements.

9. Cost accounting is directed toward the needs of

a. regulatory agencies.
b. external users.
c. internal users.
d. stockholders.

10. Cost accounting is necessitated by

a. the high degree of conversion found in certain businesses.
b. regulatory requirements for manufacturing companies.
c. management's need to be aware of all production activities.
d. management's need for information to be used for planning and
controlling activities.

11. The process of ___________ causes the need for cost accounting.
a. conversion
b. sales
c. controlling
d. allocating

12. Financial accounting

a. is primarily concerned with internal reporting.
b. is more concerned with verifiable, historical information than is cost
accounting.
c. focuses on the parts of the organization rather than the whole.
d. is specifically directed at management decision-making needs.

13. Financial accounting and cost accounting are both highly concerned with
a. preparing budgets.
b. determining product cost.
c. providing managers with information necessary for control purposes.

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d. determining performance standards.

14. Which of the following topics is of more concern to management accounting than to
cost accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations

15. Cost and management accounting

a. require an entirely separate group of accounts than financial accounting
uses.
b. focus solely on determining how much it costs to manufacture a product
or provide a service.
c. provide product/service cost information as well as information for
internal decision making.
d. are required for business recordkeeping as are financial and tax
accounting.

16. Which of the following statements is true?

a. Management accounting is a subset of cost accounting.
b. Cost accounting is a subset of both management and financial
accounting.
c. Management accounting is a subset of both cost and financial
accounting.
d. Financial accounting is a subset of cost accounting.

17. Which of the following statements is false?

a. A primary purpose of cost accounting is to determine valuations needed
for external financial statements.
b. A primary purpose of management accounting is to provide information
to managers for use in planning, controlling, and decision making.
c. The act of converting production inputs into finished products or
services necessitates cost accounting.
d. Two primary hallmarks of cost and management accounting are
standardization of procedures and use of generally accepted accounting
principles.

18. A long-term plan that fulfills the goals and objectives of an organization is known as
a(n)
a. management style.
b. strategy.
c. mission statement.
d. operational mission.

19. Core competencies are not

a. internal functions crucial to the success and survival of a company.
b. attributes that keep a firm from competing.
c. different for every organization.
d. considered influences on corporate strategies.

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20. The set of processes that convert inputs into services and products that consumers
use is called
a. a core competency.
b. an operational plan.
c. the value chain.
d. the product life cycle.

21. The balanced scorecard perspective that focuses on using a firms intellectual
capital to adapt to customer needs through product or service innovations is the:
a. learning and growth perspective c. customer value perspective
b. internal business perspective d. financial perspective

22. The balanced scorecard perspective that addresses things that an organization
needs to do well to meet customer needs and expectations:
a. learning and growth perspective c. customer value perspective
b. internal business perspective d. financial perspective

23. The balanced scorecard perspective that addresses how well the organization is
meeting specific customer-based criteria is the:
a. learning and growth perspective c. customer value perspective
b. internal business perspective d. financial perspective

24. The balanced scorecard perspective that addresses concerns about organizational
growth is the:
a. learning and growth perspective c. customer value perspective
b. internal business perspective d. financial perspective

25. The world has essentially become smaller because of

a. improved technology.
b. trade agreements.
c. better communications systems.
d. all of the above.

26. The value chain

a. reflects the production of goods within an organizational context.
b. is concerned with upstream suppliers, but not downstream customers.
c. results when all non-value-added activities are eliminated from a
production process.
d. is the foundation of strategic resource management.

27. In a global economy,

a. the trade of goods and services is focused on trade between or among
countries on the same continent.
b. the international movement of labor is prohibited except for multilingual
persons.
c. the international flows of capital and information are common.
d. all of the above happen in a global economy.

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28. Which of the following U.S. legislation relates to bribes being offered to foreign
officials?
a. Racketeer Influenced and Corrupt Organizations Act
b. Foreign Illegal Activities Act
c. Foreign Corrupt Practices Act
d. Federal Bribery and Corrupt Practices Act

29. The organization whose primary function is to provide a means to share information
among cost and management accountants in the United States is the
a. Internal Revenue Service.
b. American Institute of CPAs.
c. Institute of Management Accountants.
d. Institute of Certified Management Accountants.

30. The Institute of Management Accountants issues

a. Statements on Accounting Research for Managers.
b. Statements on Management Accounting.
c. Statements on Managerial and Cost Accounting.
d. Cost Accounting Standards.

31. The Institute of Management Accountants' Code of Ethics

a. is a legally enforceable contract with all management accountants.
b. should be viewed as a goal for professional behavior.
c. is a legally enforceable contract with all CPAs.
d. provides ways to measure departures from ethical behavior.

32. The ethical standards established for management accountants are in the areas of
a. competence, licensing, reporting, and education.
b. budgeting, cost allocation, product costing, and insider trading.
c. competence, confidentiality, integrity, and objectivity.
d. disclosure, communication, decision making, and planning.

33. The Foreign Corrupt Practices Act is directed at

a. U.S. businesses operating overseas.
b. foreign businesses operating in the U.S.
c. all businesses dealing with U.S. consumers.
d. U.S. businesses operating in developed nations.

34. A managerial accountant who communicates information objectively is exercising

which of the following standards?
a. objectivity c. competence
b. integrity d. confidentiality

35. A managerial accountant who prepares clear reports and recommendations after
analyzing relevant facts is exercising which of the following standards?
a. objectivity c. competence
b. integrity d. confidentiality

36. Cost accounting standards

a. are legal standards set by the Institute of Management Accountants for

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use in all manufacturing and professional businesses.

b. are set by the Cost Accounting Standards Board and are legally binding
on all manufacturers, but not service organizations.
c. do not exist except for those legal pronouncements for companies
bidding or pricing cost-related contracts with the government.
d. are developed by the Cost Accounting Standards Board, issued by the
Institute of Management Accountants, and are legally binding on CMAs.

37. The controller of a company or other organization is

a. a staff manager.
b. an operating manager.
c. an accountant, not a manager.
d. a natural manager.

38. Which item is not an IMA Standard for Ethical Conduct?

a. Integrity.
b. Competence.
c. Loyalty.
d. Objectivity.

39. Managerial accounting is similar to financial accounting in that

a. both are governed by generally accepted accounting principles.
b. both deal with economic events.
c. both concentrate on historical costs.
d. both classify reported information in the same way.

40. Which activity is not normally performed by managerial accountants?

a. Assisting managers to interpret data in managerial accounting reports.
b. Designing systems to provide information for internal and external reports.
c. Gathering data from sources other than the accounting system.
d. Deciding the best level of inventory to be maintained.

41. The set of processes that transform raw materials into finished products is
known as a
a. differentiation strategy.
b. flexible manufacturing system.
c. lowest cost strategy.
d. value chain.

42. Which function is most directly related to management by objectives?

a. Planning.
b. Control.
c. Decision making.
d. Reporting.

43. A firm that is competing using a _______________________ strategy is

attempting to create a perception of uniqueness that will permit a higher
selling price.
a. value chain
b. lowest cost

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c. lead time
d. differentiation

44. Planning and control are

a. different names for the same thing.
b. the basic functions of management.
c. described equally well by the terms "decision making" and "performance
evaluation."
d. exemplified by, respectively, financial statements and budgeting.

B. True or False.
Write T if the statement is true otherwise, Write F.
1. Financial accounting is most concerned with meeting the needs of internal
users.
2. Managerial accounting is highly regulated by rules and regulations.
3. Financial accounting is most concerned with addressing the needs of the firm
as a whole.
4. Managerial accounting is most concerned with addressing the needs of
individual departments of the firm.
5. Cost accounting serves as a bridge between financial and managerial
accounting.
6. Mission statements typically remain unchanged throughout the life of an
organization.
7. An organizations strategy is the guiding force for its mission.
8. The learning and growth perspective of the balanced scorecard focuses on
using an organizations intellectual capital to adapt to or influence customer
needs and expectations.
9. The internal business perspective of the balanced scorecard focuses on using
an organizations intellectual capital to adapt to or influence customer needs
and expectations.
10.The internal business perspective of the balanced scorecard addresses the
things that an organization needs to do well to meet customer needs and
expectations.
11.The customer value perspective of the balanced scorecard addresses the
things that an organization needs to do well to meet customer needs and
expectations.
12.The learning and growth perspective of the balanced scorecard addresses
how well the organization is doing with regard to important customer criteria.
13.The learning and growth perspective of the balanced scorecard addresses
stakeholder concerns about profitability and organizational growth.
14.Line personnel give assistance to staff employees.
15.Line managers are directly responsible for achieving organizational goals.
16.The Sarbanes-Oxley Act of 2002 provides legal protection for individuals who
report illegal organizational activities to appropriate persons or agencies.
17.The Foreign Corrupt Practices Act of 1977 provides legal protection for
individuals who report illegal organizational activities to appropriate persons
or agencies.
18.An organizations strategy should reflect the organizations core
competencies.

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19.The learning and growth perspective of the balanced scorecard addresses the
things that an organization needs to do well to meet customer needs and
expectations.
20.The financial perspective of the balanced scorecard addresses stakeholder
concerns about profitability and organizational growth.
21. Published financial statements show costs classified by behavior.
22. Generally accepted accounting principles govern financial accounting but
not managerial accounting.
23. Economic events are the raw data for both financial and managerial
accounting.
24. Internal financial statements must be prepared using generally accepted
accounting principles.
25. The form and content of reports can influence decisions made by managers.
26. Management-by-objectives and management-by-exception are two names
for the same general management principle.
27. "Pro forma" is the name given to an income statement that classifies costs
by function.
28. Some managerial accounting reports contain costs not incorporated in the
basic accounting system.
29. A professional examination exists to test the competence of financial
accountants, but not of managerial accountants.
30. Managerial accountants should, but have no obligation to, maintain their
professional skills.
~~~~
Believe in yourself all that you are. Know that there is something inside you
that is greater than any obstacle.
~ Christian D. Larson

Answer Key
Multiple Choice True or False
1. C 1. F
2. A 2. F
3. D 3. T
4. C 4. T
5. A 5. T
6. A 6. F
7. D 7. F
8. C 8. T
9. C 9. F
10. A 10. T
11. A 11. F

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12. B 12. F
13. B 13. F
14. D 14. F
15. C 15. T
16. B 16. T
17. D 17. F
18. B 18. T
19. B 19. F
20. C 20. T
21. A 21. F
22. B 22. T
23. C 23. T
24. D 24. F
25. D 25. T
26. D 26. F
27. C 27. F
28. C 28. T
29. C 29. F
30. B 30. F
31. B
32. C
33. A
34. A
35. C
36. C
37. A
38. C
39. B
40. D
41. D
42. A
43. D
44. B

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